Categorized | Featured, Fundamentals

Best Crude Oil Indicators

Posted on 08 April 2015 by admin

There are several “to do lists” that crude oil trader would have to be aware of.

Fundamentally, the oil could be affected by the next factors:

 

Economic Indicators – Oil is the resource that drives the economy forward more than any other resource on the planet. Therefor, when economy is growing it is inevitable that demand to oil will increase and if economy is shrinking, demand will decrease.

The economic indicators that could help measure the demand of oil are:

  • Interest Rate
  • Gross Domestic Product
  • Non-farm Payrolls
  • CPI – Consumer Price Index
  • FOMC meetings
  • Any other data that can measure economic growth.

Oil vs S&P500

In the above chart we can see the strong correlation between S&P 500 and Crude Oil prices.

The last decline of oil prices in 2014/15was caused by political and supply factors.

 

Crude Oil Reserves The next factor is the most important to oil prices. This factor gives the traders the attempt to evaluate the reserves of oil at specific time.

  • Crude Inventories – Released every Wednesday at 10:30 am EST.
  • Crude Oil Production
  • Crude Oil US Domestic Production
  • Refining and Processing
  • Import/Export
  • Consumption/Sales
  • OPEC meeting and announcements.

 

Political Events Oil production is spread around the world. The top leading production countries are: Russia, Saudi Arabia, United States, Iran, China, Canada, UAE, Venezuela, Iraq, Kuwait.

Any political instability, war, conflict, fear of tension in the areas, sanctions as well as closing shipping routes could make a drastic change of Oil prices.

 

 

How to trade indicators?

 

Today, with the growing power of computers in financial markets, it is a different game. Economic indicators can be extremely profitable but very dangerous. It could be very hectic when the data release, especially when trading a volatile and liquid product like Crude oil futures. Computers that are programmed to buy or sell according to the outcome of data can shake the prices for a few minutes. Still, economic indicators have value to understand the fundamentals of the current

situation and take advantage of information to produce profit. It will take approximately fifteen to thirty minutes for the market-players to digest the data received,  however the market can still choose a direction. It does not obligate a one direction movement. If the data is indecisive so will the market be.

The first minutes or even seconds after the data release can be a great opportunity for scalp trading

(a strategy of extremely short positions, a few second to minutes).

 

Trading indicators should be integrated into a trader’s trading tool. It might take time to get use to the market’s reactions but it must be considered into overall trading observations.

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